As investors, we believe in buying great businesses with high and stable profits, shareholder oriented management, low debt levels and a strong competitive advantage. We also know that Smart Money means making smart decisions, even when it’s unconventional.
Smart Money means making smart decisions, even when it’s unconventional.
Like Charlie Munger, we like to invert problems to find unique solutions. Munger, the Vice-Chairman of Berkshire Hathaway and one of the greatest investors of all time, believes that when you are solving a problem, you should often determine what you should not do instead of what you should do. (He jokes that he wants to know where he’ll die so he’ll never go there.)
With that in mind, one of the best ways to describe our investment philosophy is by telling you what we are not:
Most investors trade far too often. Most investors hold far too many positions in their portfolios. Most investors own the same cookie-cutter investments as everyone else. Most investors don’t fully understand what they own. Because of these reasons, most investors underperform. Don’t be like most investors.
An investor is someone who believes in buying great businesses with high and stable profits, quality shareholder oriented management, low debt levels, and a strong enduring competitive advantage. We call these competitive advantages a moat, and they can come in many forms.
Warren Buffett says rule #1 in investing is to not lose money. So when we talk about investing, a moat is a crucial part of ensuring that we protect our clients’ money as much as possible.
An investor is someone who buys great businesses, but not at any price. By identifying businesses that we think are trading at a significant discount to their intrinsic value, we believe that we are helping to ensure that we don’t lose any money, even if the future results of the business are more negative than we expected.
An investor is someone who invests for the long term. We believe that when a person invests in a stock, bond, or mutual fund, they should treat that investment as if they were the owner of a business, because that’s exactly what they are. Business owners focus more on the long term prospects of a business. By focusing more on the long term, we can ignore some of the short term noise and avoid making mistakes which can cost money. When we buy a business, our ideal holding period is forever. When you intend to own something forever, you are more careful about what you buy.